The Mortgage Bankers Association mortgages seasonally adjusted index fell 38.8% to 732.1 in the week ended January 23. The fixed 30-year mortgage rates averaged 5.22 in the week, down from 5.24 percent and 4.89 percent in early January.

The MBA's seasonally adjusted index of refinancing applications dropped 48 percent to 3,373.9 last week while loan requests for home purchases declined 2.9% to 294.3.

Analysts observed that the mortgage rates increase is due to increased government borrowing to pay for financial bailouts and expected economic stimulus facilitate recovery recession have caused Treasury yields increase, countering Fed efforts to drive mortgage rates down.

The 10-year Treasury yields, which help control mortgage rates, have increased nearly a half-percentage point since late December to 2.53%.